KPMG PACICC

Question 1

What are the Provincial regulatory responsibilities?

Answer 1

In addition to solvency regulation, provincial regulation is aimed at matters such as:
• Licensing of insurance companies
• Terms and conditions of insurance contracts and their interpretations
• Licensing of agents, brokers and claims adjusters
• Sales practices and information disclosure
• Claim settlement practices
• Compulsory insurance coverage and residual markets
• Filing and approval of premium rates

Question 2

What are the Federal regulatory responsibilities?

Answer 2

Ensure that federally supervised companies remain able to meet their obligations to PH
• OSFI is responsible for financial solvency supervision of federally regulated insurance companies
• Relevant legislations: OSFI Act, ICA

Question 3

What has led to the success of the Canadian regulatory environment?

Answer 3

Collaborative process to between:
• Supts of financial institutions (fed + prov)
• CIA and CICA
• Representatives from the industry (such as IBC)

*Change from one organization is often complemented by actions in another

Question 4

Due to insurance company failures in the 1980s, several regulatory initiatives were put forward in Canada. What are they?

Answer 4

• Adequacy of claims reserves was fundamental to the financial health of P&C insurance cies. Require an annual certificate signed by an appropriately qualified actuary
• Re is so important to the financial soundness of PC insurance cies. Actuary must review the adequacy and the appropriateness of Re arrangements and be prepared to express a view on the recoverability of amount that will be due from Re

Question 5

What were the 1990s changes to ICA?

Answer 5

• Surplus test provisions were strengthened (min based on WP and incurred losses + margins on reserve)
• Regulations to address the excessive use of Re and the use of unregistered Re
• Actuarial certification of the adequacy of outstanding claims and UEPR provisions (policy liabs)
• Creation of PACICC
• Introduction of the concept of AA

Question 6

In the 2000s there were changes to Canadian insurance regulation. What were they?

Answer 6

• Effective 01Jan2003, federally regulated PC insurers started including discounted policy liabs in their FS
• OSFI implemented the MCT and mandated external review of AA reports
• ASB introduced new standards to address when an entity would recognize a financial instrument on its BS and how the financial instrument would be measured once recognized

Question 7

Provide Elements contained in the AAR

Answer 7

• Opinion of AA on fairness and adequacy of policy liabs
• Detailed commentary
• Data exhibits
• Calculation supporting the opinion

Question 8

There were 3 changes in the SOP related to margins for adverse deviations (MfAD). What are they?

Answer 8

1 - Recognition of using stochastic methods to determine MfAD
2 - Low margin for interest rate was decreased from 50 to 25 basis points
3 - High margin for claims dev increased from 15 to 20%
• In times of greater uncertainty it is acceptable to select a higher margin such as 20%
• Based on actuarial judgment (limited to max of 20%)

Question 9

What is the purpose of the DCAT?

Answer 9

Identify:
• Plausible threats to satisfactory financial condition
• Actions which lessen the likelihood of those threat
• Actions which would mitigate a threat if it materialized

Question 10

Provide Roles in solvency monitoring of AMF in Quebec

Answer 10

• Ensure financial institutions have necessary authorizations to operate in Quebec
• Oversee financial institutions
• Develop guidelines and standards intended for financial institutions